United States District Court, N.D. Illinois
February 25, 2004.
LOU BLAND, EDWARD HODGMAN, GERALDINE ROSATO, ERVIN SHORES, and RICHARD HORCHER, Plaintiffs,
FIATALLIS NORTH AMERICA, INC., CASE NEW HOLLAND INC., and CNH HEALTH AND WELFARE PLAN, Defendants
The opinion of the court was delivered by: JAMES ZAGEL, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff Lou Bland, Edward Hodgman, Geraldine Rosato, Ervin Shores,
and Richard Horcher are retirees of defendant Fiatallis North America,
Inc., who retired prior to 1989, as well as their surviving spouses, and
who have brought suit against Fiatallis, Case New Holland Inc. ("CNH"),
and the CNH Health and Welfare Plan. The first claim for relief arises
under § 502(a)(1)(B) of the Employee Retirement Income Security Act
("ERISA"), and seeks "to enforce . . . rights under the terms of five
ERISA plans. 29 U.S.C. § 1132(a)(1)(B). Plaintiffs purport to bring
this action on behalf of these sub-classes of Fiatallis retirees, and
surviving spouses of Fiatallis retirees:
1. (i) Former Fiatallis salaried employees who
retired after January 1, 1977 and before
January 1, 1978 and were covered at retirement
under Fiatallis's "Benefits For Retired
Salaried Employees" plan, and (ii) their
2. (i) Former Fiatallis salaried employees who
retired after January 1, 1978 and before 1989,
and were covered at retirement under
Fiatallis's "Group Health Plan for Active
Salaried Employees" plan, and (ii) their
3. (i) Former hourly employees at Fiatallis's
Deerfield, Illinois plant, who retired after
January 1, 1978 and before 1989, and were
covered at retirement under the "Health
Benefits" Plan, and (ii) their surviving
4. (i) Former hourly employees at Fiatallis's
Carol Stream, Illinois plant, who retired after
January 1, 1978 and before 1989, and were
covered at retirement under the "Benefits for
Retired Hourly Employees" Plan, and (ii) their
5. (i) Former hourly employees at Fiatallis's
Springfield, Illinois plant, who retired after
March 26, 1985 and before 1989, and were
covered at retirement under the "Benefit Fact
Sheet" issues on March 25, 1985 and April 1,
1985, and (ii) their surviving spouses.
This case is a reaction to defendant CNH's plan changes in February
2001, which increased retiree and surviving spouse medical and dental
plan premiums, and reduced certain benefit plan coverage levels.
Plaintiffs allege that "the employee welfare benefit plans, and the
benefits thereunder are vested under" ERISA and its implementing
regulations. They allege that the plan documents "constitute an agreement
by Fiatallis to provide vested group health care benefits to the
plaintiff class under ERISA and the cases interpreting ERISA," and that
they have "vested rights to the group health care benefit plans promised
to them by Fiatallis through the plan documents presented to them by
Fiatallis at and before their retirement." Plaintiffs allege further that
defendants are obligated to continue the group medical plans under which
plaintiffs retired "at the same premium cost and at substantially the
same benefit levels" in effect at retirement.
The parties have now submitted cross-motions for partial judgment on
the pleadings under Federal Rule of Civil Procedure 12(c), as to
Plaintiffs' first claim for breach of an ERISA contract. Judgment on the
pleadings under Rule 12(c) is appropriate after the parties have filed a
complaint and answer if "it appears beyond doubt that the plaintiff
cannot prove any facts that
would support his claim for relief." Craigs, Inc. v.
General Elec. Capital Corp., 12 F.3d 686, 688 (7th Cir. 1993). While
I should view the facts in the complaint in the light most favorable to
the non-moving part, I am "not obliged to ignore any facts set forth in
the complaint that undermine the plaintiffs claim or to assign any weight
to unsupported conclusions of law." R.J.R. Servs., Inc. v. Aetna Cas.
& Sur. Co., 895 F.2d 279, 281 (7th Cir. 1989). The pleadings in
this case include not only plaintiffs' amended complaint, filed on August
13, 2003, and defendants' answer to the amended complaint, filed on
September 22, 2003, but also the plan documents attached to the amended
complaint. See Warzon v. Drew, 60 F.3d 1234, 1237 (7th Cir.
1995); Fed.R.Civ.P. 10(c).
The Supreme Court recently reaffirmed its long-standing view that ERISA
is not an entitlement statute:
[N]othing in ERISA requires employers to establish
employee benefit plans. Nor does ERISA mandate
what kind of benefits employers must provide if
they choose to have such a plan. Rather, employers
have large leeway to design disability and other
welfare plans as they see fit. . . . The validity
of a claim to benefits under an ERISA plan . . . is
likely to turn in large part on the interpretation
of terms in the plan at issue.
Black & Decker Disability Plan v. Nord, 123 S.Ct. 1965
1971 (2003) (citations and quotation marks omitted). "ERISA does not
create any substantive entitlement to employer-provided health benefits
or any other kind of welfare benefits. Employers or other plan sponsors
are generally free under ERISA, for any reason at any time, to adopt,
modify, or terminate welfare plans." Curtiss-Wright Corp. v.
Schoonejongen, 514 U.S. 73, 78 (1995).
As a general rule, ERISA distinguishes between pension plans and
welfare plans. 29 U.S.C. § 1002(3). Welfare plans the plans
at issue here include those that provide "medical, surgical or
hospital care or benefits." 29 U.S.C. § 1002(1). While ERISA imposes
minimum vesting standards for pensions plans, 29 U.S.C. § 1053, it
specifically exempts welfare plans from the vesting requirements,
29 U.S.C. § 1051(1); see Inter-Modal Rail Employees Ass'n v.
Atchison Topeka & Santa Fe. R.R. Co., 520 U.S. 510, 516 (1997).
Therefore, ERISA welfare plans are alterable unilaterally by the
employer, unless the right is waived (i.e., unless vesting
occurs). Gable v. Sweetheart Cup Co., Inc., 35 F.3d 851 (4th
Cir. 1994). If vesting is to occur in a welfare plan, the employer must
so provide in "clear and express language" in the governing plan
documents.*fn1 Nasti v. World Book, Inc., No. 00 C 3880, 2002
U.S. Dist. LEXIS 2407, at *11-12 (N.D. Ill. Feb. 14, 2002). However, the
plan documents need not include the word "vest," "vested," or "vesting"
for vesting to occur. Bidlack v. Wheelabrator Corp.,
993 F.2d 603, 608 (7th Cir. 1993). Plaintiffs who assert rights under ERISA to
vested welfare benefits such as the plaintiffs here bear
the burden of proving by a preponderance of the evidence that the
employer had a clear and express intent to render the benefits forever
unalterable. Nasti v. World Book, Inc., 2002 U.S. Dist. LEXIS
2407, at *12-13. Therefore, the issue in these Rule 12(c)
motions is whether each of the plans on which plaintiffs rely
contain "clear and express" vesting language.
The January 1977 "Benefits for Retired Salaried Employees" Plan
and "Dental Plan for Retired Salaried Employees"
The claims of salaried employees who retired in calendar year 1977 are
governed by the January 1977 "Benefits For Retired Salaried Employees"
plan and "Dental Plan For Retired Salaried Employees." This salaried plan
contained a section entitled "when coverage ends." It provided: "Your
Basic and Major Medical coverage remains in effect so long as you or your
surviving spouse are living." The salaried plan also contained a section
entitled "when dental coverage ends." It provided: "Your Company-provided
dental coverage remains in effect so long as you or your surviving spouse
are living." These provisions did not bar post-retirement changes to the
plan because they stated only that coverage remains in effect; they did
not state that a particular benefit or benefit level remains in effect.
These plans contained no "clear and express" vesting language that
forever precluded any change to them.
The January 1978 "Group Health Plan For Active Salaried
The January 1978 salaried plan contained a section entitled "benefits
can continue at retirement." (emphasis added) That section
provided: "When you retire the Basic Plan benefits continue to
be paid for you by the Company. If you wish to continue the Major
Medical, you continue to pay your share of the cost." (emphasis added)
Under a section entitled "protection
for your spouse and dependents in the event of your death," the
January 1978 salaried plan provided:
If you should die while your spouse is covered by
the plan, then your spouse and any eligible
dependents (including sponsored dependents already
covered) can continue the protection.
Protection will continue until your
spouse dies, remarries, or is covered by another
employer's group plan.
Your spouse will be required to make monthly
payments for both Basic and Major Medical
However, if you are retired or eligible to retire
at the time of your death, your spouse will make
contributions only for Major Medical coverage.
Fiat-Allis will provide the Basic coverage.
(emphasis added). The January 1978 salaried plan contained a section
entitled "certain dental benefits continue upon retirement." It provided:
"If you retire under the Salaried Employees' Retirement Plan of
Fiat-Allis, you and your eligible dependants are covered under a
dental program." (emphasis added).
Courts consistently construe language that benefits "shall continue" or
"will continue" not to create unalterable lifetime benefits. In
Sengpiel v. B.F. Goodrich Co., 156 F.3d 660, 668 (6th Cir.
1998), for example, the plan documents contained this language: "if you
retire and are eligible for a pension you shall continue to have
the same health coverage." (emphasis added). The court found that "such
language neither expressly guarantees lifetime benefits nor creates an
ambiguity as to whether such benefits are vested." Id. Likewise,
in UAW, Local No. 1697 v. Skinner Engine Co., 188 F.3d 130, 135
(3rd Cir. 1999), the governing plan document stated that "[t]he Company
will continue to provide major medical insurance coverage" and that life
insurance "shall remain" at a given dollar amount. The court stated:
A plain reading of the phrases "will continue" and
"shall remain," certainly does not unambiguously
indicate that benefits will continue ad infinitum
as argued by the appellants. It cannot be said
that the phrases clearly and expressly indicate
vesting since there is simply no durational
language to qualify these phrases.
Id. at 141. And most recently, in UAW v. Rockford
Powertrain, Inc., 350 F.3d 698
, 701, 703 (7th Cir. 2003), the
Seventh Circuit found that language to the effect that "health coverage
is continued until . . . death" and that "if you die after
retirement, health coverage may be continued for your spouse
. . . unambiguously do not provide the plaintiffs with vested lifetime
health insurance benefits." (emphasis added); see also Joyce v.
Curtiss-Wright Corp., 171 F.3d 130
, 134 (2d Cir. 1999) ("will be
provided" unambiguously did not vest benefits).
In light of this case law, the January 1978 salaried plan's reference
to "can continue" and "continue" is not clear and express vesting
language. Indeed, "can continue" and "continue" is even weaker evidence
of vesting than was the "shall continue" and "will continue" language in
Sengpiel and Skinner Engine Co., where the courts found
no vesting had occurred. In addition, the plan's reference that survivor
benefits "will continue until your spouse dies, remarries, or is covered
by another employer's group plan" similarly did not vest retiree
benefits. Indeed, the retiree plan in Sengpiel contained "until
dies or remarries" language, but the court said that it did not vest
benefits: "While this language may imply generally that benefits are to
continue at the same rate provided to the retiree at his or her death, it
falls short of expressing a clear intent to render such benefits forever
unalterable." 156 F.3d at 668 (quotation marks omitted). Finally, the
"are covered" language in the dental plan is even weaker than the "can
"continue" language in the salaried plan. Therefore, the language
in the January 1978 "Group Health Plan For Active Salaried Employees" did
not vest benefits.*fn2
The January 1978 "Health Benefits" Plan for Hourly Deerfield
Employees and the January 1978 "Benefits For Retired Hourly Employees"
Plan for Carol Stream Employees
The January 1978 hourly Deerfield and Carol Stream plans which
contain essentially identical relevant language covered both
medical and dental benefits, and they considered dental benefits to be a
part of the medical benefits package. They provided: "Your Fiat-Allis
Retired Medical Benefits are provided to help you meet the
expense of illness, injury, and other similar emergencies within your
family." (emphasis added). The plans also provided: "If a retired
employee dies, the surviving spouse will have basic coverage continued
for his or her lifetime at no cost." The "are provided" language is even
weaker than the "can continue" and "continue" language in the 1978
salaried plan, and thus does not vest benefits. In addition, the
surviving spouse "coverage" language does not render benefits unalterable
for the same reason noted for the surviving spouse language in the 1978
salaried plan. "While this language may imply generally that benefits are
to continue at the same rate provided to the retiree at his or her death,
it falls short of expressing a clear intent to render such benefits
Sengpiel, 156 F.3d at 668 (quotation marks omitted).
Therefore, these plans also contained no "clear and express" vesting
The March/April 1985 "Benefit Fact Sheets"
These documents address the benefits afforded to salaried employees
affected by the shutdown of the Fiatallis Springfield, Illinois
plant.*fn3 Paragraph 2 of the Benefit Fact Sheet contains the only
language that concerned retiree medical and dental benefits. It provided:
"Salaried employees eligible for retirement will have the retired
employee benefits in effect prior to March 1, 1985." The salaried retiree
benefits in effect prior to March 1, 1985 were set forth in the January
1978 "Group Health Plan for Active Employees," which, as noted, covered
salaried employees only. Because that plan did not contain clear and
express language that forever prohibited changes to benefit levels,
neither did the "Benefit Fact Sheets."
In summary, the most that plaintiffs can establish is that the plans on
which they rely are silent or incomplete, as opposed to ambiguous, on the
issue of vesting.*fn4 But this is insufficient
for purposes of avoiding adverse judgment on the pleadings, let
alone for purposes of establishing a claim to vested benefits. See
Rossetto v. Pabst Brewing Co., 217 F.3d 539, 544 (7th Cir. 2000)
(plaintiffs cannot avoid motion for judgment against them on the claim
for vested benefits unless they demonstrate ambiguity). Plaintiffs thus
cannot satisfy their burden of establishing vested medical and dental
benefits for any of the sub-classes they purport to represent.
For the reasons above, Defendants' Motion for Judgment on the First
Claim for Relief in the Amended Complaint is GRANTED and Plaintiffs'
Motion for Partial Judgment on the Pleadings as to Plaintiffs' First
Claim for Breach of an ERISA Contract is DENIED.